No Fixed Abode: The Dealership's Greatest Hits
Last week, I told you the tale of my friend Rodney’s grandmother who got taken to the cleaners recently by a Cleveland-area Buick dealer. That story’s not quite finished — apparently there have been a few conversations and trips back and forth to dealer, and at one point the “lost paperwork” excuse came into play — so I’ll update all of you once everything shudders to a final halt.
As can be expected from the always-contrarian B&B, not all of you were on the side of the elderly lady in the case. One particularly interesting comment went something like this: “It’s ironic that Jack and Rodney are complaining about the dealer making money off Grandma while at the same time smirking to themselves knowing how often they did that back in the day.”
Well, I cannot say that I ever charged anyone over sticker price for any new car, ever. Not even during the week that the first Ford Expeditions started arriving at dealerships and customers were doing everything but using lethal force to get their hands on one.
That doesn’t mean that I didn’t see some people get “grossed” in the most hardcore method imaginable. So, without further ado, here are a few tales of outrageous dealer-profit fortune, including one in which your humble author played the villain.
Once Bitten, Twice Shy: The Ford dealer for which I worked during 1995 and 1996 was not SVT certified, which meant that we could not carry the Cobra or Lightning. I found this personally frustrating for a number of reasons, most of them centered around not being able to take a Cobra home for the weekend. However, the decision by our dealership principal, a former WWII bombardier who was harder than a century-old railroad nail, to avoid the SVT certification and all its associated obligations made perfect sense. We could barely sell one Mustang a month to our sleepy university-professor community, and we didn’t even keep Probes in stock. There was no chance of us being able to sell enough SVT products to justify the considerable costs involved. So no Mystic Cobra demos for young Jack.
Imagine my pleasant surprise, therefore, when a young man with a nearly-new ’96 Cobra rolled up and said that he wanted to trade it in for the well-equipped Mustang GT convertible parked outside the dealership door. He seemed prepared for the idea that he’d be losing some money on his car, which is not always the case with people who are trying to trade in current-model-year cars. I promised that we’d make him a rock-bottom deal and I mentally prepared for a long weekend with that Cobra in the infamous Hocking Hills region of Southwestern Ohio.
When I went outside to evaluate the trade, however, I could tell that something was wrong. The badges were right, but the bumpers were wrong. The interior looked awfully plain. Could it be? I popped the hood to confirm. Yup — this was a base V-6 ‘Stang.
Son of a bitch! I stormed back in just in time to find the car’s owner handing over a copy of the original purchase order for the car. He’d bought it from a Columbus-area dealer that was infamous for pushing ethical boundaries and, sure enough, a boundary had been pushed here. The purchase order showed a base V-6 Mustang … and a dealership-added “SVT Style Package” that just happened to bring the price up to the MSRP of a new Cobra coupe. When I explained this to him in front of the helpfully-popped bonnet of his “Cobra”, the kid lost his temper with me, implied that I had a conjugal relationship with my own mother, slammed the hood shut, and prepared to peel rubber out of our lot. “I’M GOIN’ BACK TO (insert name of SVT-scam dealer)! FUCK YOU, BUDDY!”
He slammed on the gas. The tires didn’t spin.
“If there truly is one of those born every minute,” Rodney sagely observed, “the white race is in real trouble.”
Eliot Spitzer Got His Escorts Cheaper: It was a boring Thursday afternoon and I was idly flirting with the bug-eyed title girl when some old man and his wife rolled up in a temp-tagged Escort sedan. “We’re here to see Ralph,” the man said, strutting onto our parquet floor with the attitude of a geriatric Napoleon. Ralph was the 65-year-old guy who had been at the dealership since Vietnam or thereabouts. He didn’t take “ups”; he didn’t need to. He had a steady stream of referrals and repeat customers. He told funny stories and jokes, he acted like he was too old and feeble to negotiate, and he charged every one of his customers about $150 off sticker, if that much. Needless to say, his customers loved him …
… except for this fellow, who had taken offense to the payment Ralph had quoted him on a 24-month Red Carpet Lease of a new Escort LX sedan. It wasn’t Ralph’s fault, really; Ford Credit had garbage residuals on the Escort and as a consequence it was usually cheaper to lease a new Taurus GL than it was to lease any flavor of Escort. So his customer had run off to the big dealership outside town (see above story of fake SVT Cobra) and had gotten a payment TEN DOLLARS A MONTH LOWER.
“Can I see the deal?” Ralph asked, humble and downcast as always. Then he called me over to make sure he wasn’t suffering from some sort of visual disturbance. Yes, the payment was lower — because the dealership had done a five year open-end lease. I don’t expect that most of the B&B will even know what an open-end lease is; they’re vanishingly rare nowadays. With an open-end lease, the residual vehicle of the car is guaranteed by the customer. If you turn the car back in and it fetches less than the residual, you pay. It’s basically a balloon-payment arrangement, and most states now severely restrict its use.
That wasn’t the case in 1995, however. This approximately $13,100 Escort, which we’d have sold him for $12,500 or thereabouts, had been “capitalized” at $18,500 thanks to five grand’s worth of “protection packages” and “interior treatments” and pinstriping. The residual was set at half of the inflated MSRP. Five years from now, this guy was going to be stuck with the bill for the difference between $9,000 and the value of a five-year-old Ford Escort.
I explained it to Ralph. He explained it to the customer. The customer called his attorney and read him the contract. Then it was his turn to be humble. It took hours to make the numbers work. In the end, we bought the Escort from him for $10,000 or thereabouts and leased him a new Taurus GL. He wrote a check for about $6,000. Then, right before he left, he said to Ralph, “If you’d just given me the payment I wanted, none of this would have happened.”
“I’m very sorry,” Ralph said, and then he went out to his new five-speed Contour SE demo, specified just the way he wanted it and replaced every 60 days, and he drove home to the dinner his wife was keeping warm for him.
Two Doors Good, Four Doors Better, For Me At Least: There were two salesmen in the dealership who wouldn’t disappear into the bathroom or the breakroom when African-American customers drove onto the lot: me and the crazy old ex-hippie who wore short-sleeve polyester dress shirts and combed his hair over his bald spot. Note that I did not include Rodney in that list. “For me to be forced to deal with black customers, simply because I happen to be from the motherland,” he declared, “would be racist beyond belief. It’s well-known that black customers typically have bad credit.”
My customer of that Saturday morning, a 30-ish-year-old black fellow with his eyes on an Explorer Eddie Bauer, didn’t live up to the stereotype. His credit was solid. However, his income didn’t justify the payment required to drive a Bauer home. No problem; I “moved” him to an XLT 945A package. No love from the bank. Then we tried running the numbers on an Explorer XL, which we didn’t actually have in stock. Sorry, the bank replied, we’re capping this guy at $24,000 out the door, not a penny more.
“Sir,” I told him, “you are in luck. I have an Explorer Sport that I can sell you at our invoice of $22,198.”
“Don’t want a two-door,” he said. “Four-door or nothing. Two-door looks like shit.” I reported this to my boss, who told me to take my “up” to the used-car side. There, our used-car manager showed him a two-year-old four-door Explorer XLT. The old style, with the flat front and the Ranger-ish trim. Best of all, it already had tinted windows and remote start, two things that my customer wanted. “How much?” he asked.
“Same price as that shitty two-door across the street,” my used-car manager said.
“I’ll take it!” We wrote it up and he rolled out the door a happy man. Then my boss sat me down. “Jack, while you were distracting the mark … ” I was doing what? ” … we repriced the vehicle. It was actually on the lot for $17,900, but you sold it for $22,200. Our cost on the truck, after pack, was $15,800.” I should mention that “pack” is an arbitrary amount of non-commisionable markup put on used cars, ostensibly to cover dealership expenses. Once upon a time, in the good old days, new cars had “pack,” but after the Carter recession that went the way of the dodo at most shops.
That $22,200 sale minus the Explorer’s $15,800 cost was $6,400. My commission on that was about $2,000. The check cleared the week before my wedding, so my wife and I went to Disneyworld on our honeymoon instead of our original plan, which was to stay home and work our crummy jobs. That small bit of dignity at a time when I would frequently skip lunch for financial reasons meant a lot to me. Still, I didn’t feel good about the deal. It didn’t help that my customer kept sending me referrals because he was so damn thrilled about his used Explorer. All of the referrals wanted “the same deal Willie got.” I leased them all brand-new Explorer XLTs for $500 over invoice, telling them that Willie had really taken us to the cleaners and I couldn’t afford to make that deal a second time.
And the moral of the story is only this: The deals you take are equal to the deals you make. Or something like that. Keep both of your eyes open when you buy a new car. I’ll close by quoting a bit of dialogue I just saw in a movie:
John Ruth: No one said this job was supposed to be easy.
Major Marquis Warren: Nobody said it’s supposed to be that hard, either!
Erikstrawn on Jan 08, 2016
Back in '98 I was a technician at a Nissan dealership. I did a used car inspection on a '96 Pathfinder that was absolutely horrible. It was a wreck rebuild that had runs in the paint, a screeching driver's door hinge, misaligned body panels, etc. I wrote up a laundry list of problems and the manager refused all the work except for an oil change (every used car got an oil change). While I was performing the oil change he came back and started looking at the Pathfinder. "I can pick this up for $5500 and sell it myself." he stated. The dealership had a policy that employees could buy cars for no less than $500 over what the dealership paid, and apparently some of the managers used that as a vehicle for some lucrative side-trading. I knew by this that the dealership had paid $5000 for the Pathfinder, when in good condition it would sell for $16-18 grand. A few days later a saleswoman came back and asked me to perform some more work on it that the buyer had asked for. I asked how much she sold it for. "I had it sold for $15,000, but [the used sales manager] said we had too much money in it, so I went back and got them up to $16,000." "They bought it for $5000 and had me do an oil change." She was furious. The managers had tweaked the data in the ADP system to show the car costing more than they had in it. She was getting her base commission and nothing more. The used car manager sent the rest of what should have been her commission up as "profit" to the general manager and got his monthly bonus. The general manager sent the "profit" up as well and got his monthly bonus.
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